"Competition has been shown to be useful up to a certain point and no further, but cooperation, which is the thing we must strive for today, begins where competition leaves off." - Franklin D. Roosevelt

If the have the chance to use the step drill in a drill press do it, it is a lot easier then hand drilling 1.125 inch holes, you can also make how big (what step)you need to drill the hole with a piece of tape so you don't drill one step to far.

We've never had trouble with oblong holes when using a 1-1/8" spade bit and a properly squared drill press. We like to use the style with the rather long prongs on the outside like the ones from Ace Hardware and Irwin. The ones with the spiral pilot like the Bosch Daredevil don't work well in aluminum. We usually drill from one side until the flat part meets the metal, then flip over and finish from the other side to reduce work time and give a clean hole from both sides.

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If the problem is retaining the bearings, then look at your design from the shaft perspective. Often you can retain bearings with spacers or a shaft collar on the shaft, and not have to worry about getting a press fit or something like JB Weld holding.

Alternatively, you can drill and tap a couple of bolt holes next to the bearing and use the head of the bolts to retain the bearing. Several commonly used gearboxes do this in some locations.

We've never had trouble with oblong holes when using a 1-1/8" spade bit and a properly squared drill press. We like to use the style with the rather long prongs on the outside like the ones from Ace Hardware and Irwin. The ones with the spiral pilot like the Bosch Daredevil don't work well in aluminum. We usually drill from one side until the flat part meets the metal, then flip over and finish from the other side to reduce work time and give a clean hole from both sides.

We've always used a step bit in the past, but we just picked up some spade bits and I'm excited to finally use them.

Whatever cutting tool you are using, you are unlikely to get good results if you do not clamp your workpiece to the drill press table securely in at least 2 places, preferably on either side of the cutting tool.

You may also want to put a piece of plywood or MDF under your workpiece so you do not damage the table on your drill press.

If by "extrusion" you mean tubing such as 2" x 1" and you are going to install bearings on both sides, you need to think about how to make the holes in the two sides line up sufficiently accurately.